Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

CU System Archive

CU System

CUNA Mutual sues firm over RMBS losses

 Permanent link
SEATTLE, Wash., and MADISON, Wis. (11/29/12)--CUNA Mutual Group has asked a federal court in Seattle to help it obtain documents related to the underwriting of 15 residential mortgage-backed securities (RMBS) that are at the center of its lawsuit against RBS Securities Inc.

CUNA Mutual asked the Seattle court to enforce a subpoena against Bellevue, Wash.-based Watterson Prime LLC, one of the firms that provided due diligence information that corroborated to CUNA Mutual that the $72 million MBS pool it bought from RBS between 2004 and 2007 followed preapproved underwriting guidelines. Watterson, one of several third-party companies that performed due diligence on the securities, has denied all requests for the documents, CUNA Mutual confirmed to News Now.

The company filed its lawsuit against RBS in a U.S. District Court in the Western District of Wisconsin (Madison) on Jan. 17 as for rescission of its purchases. The suit alleges CUNA Mutual bought 15 RMBS in 10 separate offerings from RBS after RBS made representations about the credit quality of the mortgage pools collateralizing those securities, including representations about Loan-to-Value Ratios, CLTV ratios, owner occupancy rates, credit ratings and the originators' adherence to stated underwriting standards.

"Each of these representations was material to CUNA Mutual, because it was likely to and did induce a reasonable investor to purchase the certificates for the purchase price at the relevant yield," said the complaint filed. "Each of these representations was false at the time it was made," the company said, adding that had it known they were false it would not have purchased the certificates.

"This action continues to be an issue of righting a wrong and is being taken in the best interests of CUNA Mutual Group and its policyholders," said Phil Tschudy, media relations manager at CUNA Mutual Group. "RBS falsely represented products it sold us between 2004 and 2007 and, as a result, we are seeking recompense. Because this issue is in litigation, we cannot comment further on the lawsuit," he told News Now.

Tropical Financial CU Low rates boost auto loans

 Permanent link
MIRAMAR, Fla. (11/29/12)--Tropical Financial CU in Miramar, Fla., is offering low rates for auto financing that have been a boon to the $574 million asset credit union's business.

This week, Tropical Financial is offering loans with as low as 1.49% interest on new or used vehicles, and refinancing rates as low as 2.5% (The Star-Ledger Nov. 25).

In the past year, the credit union has seen a 46% rise in consumer loans, propelled by the increase in auto loans, Helen McGiffin, Tropical Financial chief operating officer, told the newspaper, adding that is a "pretty hefty increase."

Because automakers are subsidizing low interest loans at dealerships, with some charging no interest, lenders realize they must offer inexpensive loans to stay competitive, McGiffin told the paper.  

Consumers currently are accustomed to 0% loans, she added.

Wis electric co-op plans alliance of CUs other co-ops

 Permanent link
CENTURIA, Wis. (11/29/12)--A Wisconsin electric cooperative is leading efforts to form an alliance of credit unions, and food, legal and other co-ops serving northwest Wisconsin to build awareness and collaboration about cooperative businesses in Polk and Burnett counties (Wisconsin Ag Connection Nov. 27).    

Polk-Burnett is a member-owned, not-for-profit electric cooperative in Centuria, Wis., established by members in 1938 to bring electricity to rural families, farms and businesses. It delivers electricity and energy services to 20,000 members, and provides propane services to 4,000 customers.

In October, Polk-Burnett partnered with a credit union, a law co-op and a newspaper publishing co-op to place the alliance's first ad in a local newspaper, Ag Connection said.

The goal is to bring 12 additional area co-ops into the alliance--including businesses in dairy, farm supplies, food and insurance, the publication said.

Although the idea of forming a regional co-op had been floating around for a few years, a suggestion to build relationships with other co-ops as a means to celebrate the International Year of Cooperatives in 2012 inspired Polk Burnett to take action, Joan O'Fallon, the co-op's communications director, told the publication.

Merchants vs interchange settlement file appeal notice

 Permanent link
NEW YORK (11/29/12)--True to their word, some retailers and merchant trade associations filed a notice of appeal in federal court in New York Tuesday to request a stay of a proposed class action $7.5 billion settlement offer in the antitrust lawsuit against Visa and MasterCard over credit card interchange fees.

The National Association of Convenience Stores, National Cooperative Grocers Association, National Grocers Association, the National Restaurant Association, D'Agostino Supermarkets Inc. and six others filed a notice of appeal in the U.S. Court of Appeals for the Second Circuit.

Home Depot separately filed a similar appeal in the same court.

Also on Tuesday, U.S. District Judge John Gleeson gave preapproval to the settlement.

In a letter to the judge, the plaintiffs requesting the stay wrote: "The appeal addresses that portion of the order that 'enjoins the members of … the Rule 23(b)(2) Settlement Class … from challenging in any action or proceeding any matter covered by this Class Settlement Agreement or its release and covenant not to sue provisions'…"

The plaintiffs added that the court "committed reversible error by imposing an immediate and facially overbroad injunction on a provisional mandatory (b)(2) class without engaging in the required heightened scrutiny as to whether such a class can be certified without violating the due process rights of absent class members."

Credit unions are not involved in the lawsuit, but they and other financial institutions would be affected by the settlement's terms. The $7.5 billion settlement would require a reduced interchange rate fee (IRF) of 10 basis points for an eight-month period, likely beginning in mid-2013, and would apply to all card issuers, including credit unions (News Now Nov. 1).

If the total credit IRF reduction is $1.2 billion, credit unions with credit card programs would lose about $50 million in total revenues, or about 0.5 basis points on their total assets, Credit Union National Association (CUNA) said. The loss would be concentrated among a relatively small number of credit unions with very active credit card programs.

Interchange revenue enables credit unions to provide "essential and cost-effective credit card services" to members, CUNA President/CEO Bill Cheney has said. "We also know that the temporary reduction in interchange revenue that credit unions will experience will not likely find its way into the pockets of consumers, but will more likely into those of merchants," Cheney said.

Barclays tells court NCUAs MBS suit filed too late

 Permanent link
KANSAS CITY, Kan. (11/29/12)--Barclays has asked a federal court in Kansas to dismiss the National Credit Union Administration's (NCUA) lawsuit against it over $555 million in mortgage-backed securities sold by a Barclays unit to U.S. Central FCU and the Western Corporate FCU in 2006 and 2007.

NCUA's suit, filed Sept. 25 in the U.S. District Court for the District of Kansas, Kansas City, alleges that Barclays Capital Inc., BCAP LLC and Securitized Asset Backed Receivables LLC made misleading statements about the MBS that contributed to the failure of the two corporates.

Barclays' motion filed Monday with the court alleges the case should be dismissed because:

  • The court is not the proper venue for NCUA's claims;
  • NCUA's claims are barred by the statute of limitations and statue of repose, which means Barclays' is arguing NCUA did not file its lawsuit in time; and
  • NCUA did not plead any actionable misrepresentations or omissions in the offering materials.  Barclays said the offering materials accurately disclosed the risk profiles of the certificates; the NCUA didn't plead that the materials reflected misrepresentations regarding underwriting guidelines; statements about LTV ratios are non-actionable opinions; and the agency had not pleaded that owner occupancy representations were false when made.
The corporate credit unions were liquidated by NCUA in 2010.  Barclays' motion argues that federal law requires NCUA to file claims within a year after the alleged violations were, or could have been, discovered.

ACIPCO FCU members receive rebate for 20th year

 Permanent link
BIRMINGHAM, Ala. (11/29/12)--For the 20th consecutive year, ACIPCO FCU, based in Birmingham, Ala., announced its 7,300 members will receive a rebate totaling more than $1.7 million.

The interest rebate/bonus dividend is the largest rebate ever offered by the $130 million asset credit union to its members.  Its board of directors approved the rebate/dividend for 2012 at 35%.

"We're extremely fortunate to be able to offer such a large rebate with the economy in such an unstable state," said ACIPCO FCU CEO Mike Harrell.  "The credit union doesn't take credit for this rebate; we owe our success to our loyal members."

The dividend--distributed to members based on interest earned and dividends received between Jan. 1 and Sept. 30--will be deposited into members' accounts by Dec. 15.

ACIPCO FCU has offered a rebate since 1993 and has paid out more than $25 million to members during the past 20 years. It serves employees of the American Cast Iron Pipe Co. and their families.